SEC’s White Pleads for Advisor Exam Funds; Rep. Waters ‘Pushing Hard’ for User Fees Bill

As Securities and Exchange Commission Chairwoman Mary Jo White gave lawmakers on Tuesday stark statistics about the limited number of examiners the agency has to oversee advisors, Rep. Maxine Waters, D-Calif., said that she was “pushing very hard” to secure support for her user fees bill to fund advisor exams.

During her testimony before the House Financial Services Committee, White reiterated the agency’s need for adequate resources.

“I need funding to carry out my job, which I do not have now,” White told lawmakers. “Bottom line is that we are under-resourced for the responsibility that we have, and it’s a great concern to me.”

White underscored the importance of boosting the number of advisor exams, stating that from fiscal 2001 to fiscal 2014, advisors’ assets under management jumped almost 200% to $55 trillion. In 2004, the SEC, she said, “had 19 examiners per trillion dollars in investment adviser assets under management. Today, we have only eight.”

Last year, White said that the SEC was in a position to only examine 9% of registered investment advisors. “More coverage is plainly needed, as the industry itself has acknowledged,” she said.

In fiscal year 2013, examiners conducted approximately 1,615 examinations, including 438 broker-dealers, 964 investment advisors, 99 investment company complexes, 42 transfer agents, 17 clearing agencies and five municipal advisors. The staff also conducted 50 market oversight program inspections.

Last year, White also said that the SEC filed 140 actions against investment advisors, “several” of which resulted from risk-based investigations, which she described as “proactive measures to identify misconduct at an early stage so that timely action can be taken and investor losses minimized.”

But White told ThinkAdvisor in a recent interview that while the risk-based exams allow the agency to be “a lot smarter” in singling out advisors to examine, she said “that’s just not sufficient coverage.”

President Barack Obama’s 2015 budget proposal would give the SEC $1.7 billion, a 26% boost from the agency’s 2014 enacted level, and would allow the agency to add 316 staffers to the agency’s Office of Compliance Inspections and Examinations, with 240 of those examiners devoted solely to overseeing advisors.

The SEC’s fiscal year 2015 budget request, White told lawmakers, “would permit the SEC to increase its examination coverage of investment advisors who everyday investors are increasingly turning to for investment assistance with retirement and family needs.”